Paterson: You simply cannot lop $20B from Medicaid

A key element of Carl Paladino’s platform has been his assertion that he’d cut $20 billion from the state’s approximately $50 billion Medicaid program. Democrats and advocates for the poor say that would create chaos, and now Gov. Paterson, who has been somewhat removed from the Paladino-Cuomo battle, is wading into the debate.

Here’s what he’s saying about Paladino’s plan in a statement:

“These are difficult times in New York. Over the past two years, we have faced perhaps the most significant economic and budgetary crisis in our State’s history. I have been forced to make countless difficult decisions to close more than $42 billion in deficit. And while I am proud of the work my administration has accomplished, I also know that on January 1, 2011, many of these same problems will not miraculously disappear. The next governor will be forced to close another $37.2 billion in deficit over the next three fiscal years.

“I believe it is essential that the public be provided with a clear understanding of how serious our fiscal crisis is, what we can do about it, and what responsibilities government has at this time. But one candidate is suggesting he will ‘cut $20 billion from the Medicaid budget in the first months’ of his administration, which satisfies none of these goals.

“Stripped of rhetoric, his website offers only these details to achieve $20 billion in savings: reduce Medicaid spending to ‘California levels’ by ‘eliminating optional programs.’ He says he will achieve the full $20 billion in cuts through reduction in ‘gold-plated’ optional benefits and by ‘attacking waste, fraud and abuse in the system.’

“While a massive reduction in Medicaid spending might make for intriguing campaign rhetoric, I firmly believe that a Governor has the responsibility to pursue real reforms that achieve significant savings without decimating New York’s health care system and jeopardizing the lives of Medicaid recipients. Furthermore, any cuts in Medicaid spending will need to be balanced with the duty to uphold the New York constitution. Article XVII compels the governor to provide ‘The aid, care and support of the needy,’ and ‘the protection and promotion of the health of the inhabitants of the State.’ Ignoring the fuzzy math for a moment, this particular policy on Medicaid seems to be in direct conflict with the spirit of this provision in the Constitution, is almost certainly impossible to achieve, and probably violates State and Federal law.

“Due in large part to the recession, more than 700,000 New Yorkers have been added to our Medicaid caseload since Spring 2008, at a cost of approximately $3 billion to the State budget. Total Medicaid spending in the 2010-11 budget is projected to be $52.6 billion. Of this, $31.1 billion is Federal matching funding, $7.3 billion is the local government share and New York State will spend approximately $14.2 billion. I am glad that this candidate is not suggesting we can achieve $20 billion in State share savings alone, as this would represent all of New York’s projected 2010-11 Medicaid program spending. If that was the plan – and we only found out this week that it is not – New York would no longer have a Medicaid program because the State would be disqualified by the Federal government and lose all Federal funding. In this scenario, nearly five million people – roughly one in four New Yorkers – would lose their health insurance.

“However, his claim that we can achieve $20 billion in savings by reducing New York’s Optional Medicaid Services programs is equally dubious. The Federal government requires states cover 13 mandatory categories of service under Medicaid, and a state may choose to provide up to 36 specified optional services. New York provides 31. Fourteen states provide more optional services than New York, with another six providing the same amount. Twenty-one states provide between 25 and 30 of these optional services. Until last year, the aforementioned California offered 30; one less than New York. No state provides fewer than 12.

“In Federal Fiscal Year 2009, more than $13 billion was spent in New York on these optional Medicaid services, including providing aid to buy prescription medicine ($4.1 billion), personal care ($2.3 billion), non-hospital based health clinics ($1.2 billion); and intermediate care facilities for the developmentally disabled ($3.3 billion). Even if New York were to eliminate all optional Medicaid services, it would not achieve $20 billion in savings. To actually achieve $20 billion in savings, New York would have to significantly scale back or eliminate categories of mandatory Federal services, which again would result in State disqualification from the entire Medicaid program.

“The damage to New York’s health care system and the delivery of health care would be staggering. A $20 billion reduction would represent a $4.8 billion (10.2 percent) reduction in hospital industry revenues; a $2.6 billion (22.9 percent) reduction in nursing home revenues; a $2 billion (36.5 percent) reduction in home care/personal care industry revenues; and a $3.6 billion reduction in support for services to the mentally ill and developmentally disabled. Medicaid funding currently supports virtually every hospital – approximately 220 of them – and provides the majority of funding to the 636 nursing homes in New York. The economic impact of this proposed cut would be equally debilitating, as these health care providers employ nearly 1 million New Yorkers. Cuts in health care services would disproportionately affect the approximately 1.75 million children, 725,000 blind and disabled and 415,000 seniors who currently get some form of Medicaid assistance.

“The consequences of his proposal would significantly outweigh any savings to the State budget, and in all probability would actually increase State spending by driving New Yorkers from less costly preventative care to expensive emergency services. If this plan was taken seriously and followed to conclusion, dozens of hospitals and hundreds of nursing homes would close, hundreds of thousands of New Yorkers would lose their jobs, and millions of New Yorkers would lose access to affordable medication. Simply put, this plan would jeopardize the health and safety of millions of New Yorkers.

“During my tenure as Governor, I have held the line on the rate of cost escalation for health care providers and managed care plans; implemented reimbursement reforms to right-size hospital inpatient reimbursement; made investments in critically needed, less costly outpatient and primary care services; and implemented measures to make New York Medicaid a smarter purchaser of prescription drugs and transportation services for patients. I also secured changes that will rationalize the way nursing homes are paid. I advanced reforms so that New York will no longer pay for ‘never events’ like leaving in a sponge after surgery, potentially preventable readmissions to hospitals and unnecessary hospitalization of nursing home patients. Together, these measures have saved the State $4.65 billion. As we made these critical reforms, we also streamlined public program eligibility processes to ensure that eligible uninsured New Yorkers could get the health care services they need.

“Although I firmly believe more savings can and must be achieved in the Medicaid program, it is imperative that the State takes a sensible approach to reforming this vital program. In my 2010-11 budget, I proposed $726 million in responsible Medicaid cuts that would have reduced costs to the State in this fiscal year and into the future. Proposals that would have ensured appropriate use of personal care services, rationalized reimbursement for home care services, strengthened Medicaid’s ability to recover from estates and further reduced prescription drug costs were rejected by the Legislature. In my 2009-10 budget, similar proposals that would have saved the State $545 million were likewise rejected by the Legislature.

“New Yorkers deserve an intellectual discussion based on facts, not ignorant sound bites designed to mislead the public.”